THE INSOLVENCY AND BANKRUPTCY CODE, 2016 (AMENDED UPTO 18-03-2020) - - PowerPoint PPT Presentation

THE INSOLVENCY AND BANKRUPTCY CODE, 2016

(AMENDED UPTO 18-03-2020)

Maruthi Sabbani

Source: https://www.ibbi.gov.in/

Part I Preliminary

2

Part I – Preliminary

Section 1

 Short title, extent and commencement

• Code may be called the

Insolvency and Bankruptcy Code, 2016

• It extends to the whole of

India

Section 2

 Application

• Any

company incorporated under the Companies Act, 2013 (18 of 2013) or under any previous company law

• Any
• ther

company governed by any special Act

• Any Limited Liability Partnership
• Personal guarantors to CDs
• Partnership firms and proprietorship firms
• Individuals

in relation to their insolvency, liquidation, voluntary liquidation or bankruptcy,

3

Part I – Preliminary (Contd…)

Section 3

 Definitions

• “Board” means the IBBI
• “claim” means –

 A right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured, or unsecured;  Right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured

• “financial product”

 means securities, contracts

• f

insurance, deposits,  credit arrangements including loans and advances by banks and financial institutions,  retirement benefit plans, small savings instruments,  foreign currency contracts

• ther

than contracts to exchange

• ne

currency (whether Indian or not) for another which are to be settled immediately,

4

Part I – Preliminary (Contd…)

Section 3 (Contd…)

• “person” includes

 an individual  Hindu Undivided Family  company  Trust  partnership  limited liability partnership  any other entity established by a statute  a person resident outside India

• “security interest” means

 right, title or interest or a claim to property, created in favour of, or  provided for a secured creditor by a transaction which secures payment or  performance

• f

an

• bligation

and includes mortgage, charge, hypothecation, assignment and encumbrance or  any other agreement or arrangement securing payment or performance of any obligation of any person:

• Provided that security interest shall not include

a performance guarantee;

5

Part II Insolvency Resolution And Liquidation For Corporate Persons

6

Chapter – I

Section 4

 Application of this Part

• This Part shall apply to matters

relating to the insolvency and liquidation

• f

CDs where the minimum amount of the default is

• ne lakh rupees
• Provided

that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than

• ne

crore rupees

Section 5

 Definitions

• Adjudicating

Authority, for the purposes

• f

this Part, means National Company Law Tribunal

• ICD means the date of admission
• f an application for initiating CIRP

by the AA under sections 7, 9 or section 10

7

Chapter – I (Contd…)

 a public company in which a director, partner or manager of the CD is a director and holds along with relatives, more than two per

• cent. of its paid- up share capital

 A body corporate whose board of directors, managing director

• r

manager,

• in the ordinary course of business,

acts on the advice, directions or instructions of a director, partner or manager of the CD

Section 5 (Contd…)

8

• “related party”, in relation to a CD, means

 a director or partner of the CD or a relative

• f a director or partner of the CD

 a KMP of the CD or a relative of a KMP of the CD  a LLP or a partnership firm in which a director, partner, or manager of the CD or his relative is a partner  a private company in which a director, partner or manager of the CD is a director and holds along with his relatives, more than two per cent of its share capital

Chapter – I (Contd…)

 any person who controls more than twenty per cent. of voting rights in the CD on account of ownership or a voting agreement  any person in whom the CD controls more than twenty per cent.

• f

voting rights

• n

account

• f
• wnership or a voting agreement

 any person who can control the composition

• f

the board

• f

directors

• r

corresponding governing body of the CD

Section 5 (Contd…)

9

 any LLP or a partnership firm whose partners

• r employees in the ordinary course of

business, acts on the advice, directions or instructions

• f

a director, partner

• r

manager of the CD  any person on whose advice, directions or instructions, a director, partner or manager

• f the CD is accustomed to act

 a body corporate which is a holding, subsidiary or an associate company of the CD, or a subsidiary of a holding company to which the CD is a subsidiary

Chapter – II

Section 6

 Persons who may initiate corporate insolvency resolution process

• Where any CD commits a

default, a FC , an OC or the CD itself may initiate CIRP in respect of such CD in the manner as provided under this Chapter

Section 7

 Initiation of CIRP by financial creditor

• A FC either by itself or jointly with may file an

application for initiating CIRP against a CD before the AA when a default has occurred.

• Provided that for the FC , referred to in clauses

(a) and (b) of subsection (6A) of section 21,  an application for initiation CIRP against the CD shall be filed jointly by not less than

• ne hundred of such creditors in the same

class or  not less than ten per cent. of the total number of such creditors in the same class, whichever is less

• The FC shall make an application under sub-

section (1) in such form and manner and accompanied with such fee as may be prescribed.

10

Chapter – II

Section 7 (Contd…)

• The FC shall, along with the application furnish –

 record of the default recorded with the IU or such other record or evidence of default as may be specified  the name of the RP proposed to act as an IRP  any other information as may be specified by the Board.

• The AA shall, within fourteen days ascertain the

existence of a default from the records of an IU or on the basis of other evidence furnished by the FC

• Where the AA is satisfied that –

 a default has occurred and there is no disciplinary proceedings pending against the proposed RP , it may, by order, admit such application; or  default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed RP , it may, by order, reject such application Provided that the AA shall, before rejecting the application give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the AA

• The CIRP shall commence from the date of

admission of the application under sub- section (5).

• The AA shall communicate-

 the order to the FC and the CD  the order to the FC within seven days of admission or rejection of such application

11

Chapter – II (Contd…)

Section 8

 Insolvency resolution by operational creditor

• An OC may, on the occurrence of a default,

deliver a demand notice

• f

unpaid

• perational

debtor copy

• f

an invoice demanding payment of the amount involved in the default to the CD

• The CD shall, within a period of ten days bring

to the notice of the OC

 existence of a dispute, [if any, or] record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice  the [payment] of unpaid operational debt-

• by sending an attested copy of the record of

electronic transfer of the unpaid amount from the bank account of the CD

• by sending an attested copy of record that the

OC has encashed a cheque issued by the CD

Section 9

 Application for initiation

• f

CIRP by

• perational creditor
• After the expiry of the period of ten days

from the date of delivery of the notice or invoice demanding payment

 if the OC does not receive payment from the CD or  notice of the dispute the OC may file an application before the AA for initiating a CIRP

• The application shall be filed in such form

and manner and accompanied with such fee as may be prescribed.

12

Chapter – II (Contd…)

Section 9 (Contd…)

• The OC shall, along with the application

furnish-

 a copy of the invoice demanding payment

• r demand notice delivered by the OC to

the CD  an affidavit to the effect that there is no notice given by the CD relating to a dispute

• f the unpaid operational debt

 a copy of the certificate from the financial institutions maintaining accounts of the OC confirming that there is no payment of an unpaid operational debt  a copy of any record with IU confirming that there is no payment of an unpaid

• perational debt by the CD

 any other proof confirming that there is no payment of any unpaid operational debt by the CD

• r

such

• ther

information, as may be prescribed.

• The CIRP shall commence from the

date of admission of the application

• An OC initiating a CIRP under this

section, may propose a RP to act as an IRP

13

Chapter – II (Contd…)

Section 9(Contd…)

• The AA shall, within fourteen days by an
• rder–

 admit the application and communicate such decision to the OC and the CD if

• the application is complete
• there

is no [payment]

• f

the unpaid

• perational debt
• the invoice or notice for payment to the

CD has been delivered by the OC

• no notice of dispute has been received by

the OC or there is no record of dispute in the IU

• there

is no disciplinary proceeding pending against any RP proposed

14

 reject the application and communicate such decision to the OC and the CD, if –

• the application is incomplete;
• there has been [payment] of the unpaid
• perational debt
• the creditor has not delivered the invoice
• r notice for payment to the CD
• notice of dispute has been received by

the OC or there is a record of dispute in the IU

• any disciplinary proceeding is pending

against any proposed RP Provided that AA , shall before rejecting an application give a notice to the applicant to rectify the defect within seven days

Chapter – II (Contd…)

Section 10

 Initiation of CIRP by corporate applicant

• Where

a CD has committed a default, a corporate applicant thereof may file an application for initiating CIRP with the AA

• The corporate applicant shall, along with the

application, furnish

 the information relating to its books of account and such other documents for such period as may be specified;  the information relating to the resolution proposed to be appointed as an IRP  the special resolution passed by shareholders of the CD or the resolution passed by at least three- fourth of the total number of partners of the CD, approving filing of the application

• The AA shall, within a period of

fourteen days of the receipt of the application, by an order

 admit the application, if it is complete or  reject the application, if it is incomplete  Provided that AA shall, before rejecting an application, give a notice to rectify the defects within seven days

• The CIRP shall commence from

the date

• f

admission

• f

the application

15

Chapter – II (Contd…)

Section 11

 Persons not entitled to make application

• The following persons shall not be entitled

to make an application to initiate CIRP under this Chapter, namely:

 a CD undergoing a CIRP  a CD having completed CIRP twelve months preceding the date of making of the application  a CD or a FC who has violated any of the terms

• f

resolution plan which was approved twelve months before the date

• f making of an

application under this Chapter  a CD in respect of whom a liquidation order has been made.

 Time-limit for completion

• f

insolvency resolution process

• the CIRP shall be completed within a period of
• ne hundred and eighty days
• The RP shall file an application to the AA to

extend the period of the CIRP , if instructed to do so by a resolution passed at a meeting of the CoC by a vote of sixty-six per cent.

• if the AA is satisfied that CIRP cannot be

completed within one hundred and eighty days, it may by order extend the duration by such further period as it thinks fit, but not exceeding ninety days

• any extension of the period of CIRP shall not be

granted more than

• nce,

the CIRP shall mandatorily be completed within three hundred and thirty days from the ICD,

16

Section 12

Chapter – II (Contd…)

Section 12A

 Withdrawal

• f

application admitted under section 7, 9 or 10

• The AA may allow the withdrawal of

application admitted

 under section 7 or section 9 or section 10,

• n an application made by the applicant

 with the approval of ninety per cent. voting share of the CoC, in such manner as may be specified

 Declaration of moratorium and public announcement.

• The

AA , after admission

• f

the application under section 7 or section 9

• r section 10, shall, by an order –

 declare a moratorium for the purposes referred to in section 14  cause a public announcement of the initiation

• f

CIRP and call for the submission of claims under section 15;  appoint an IRP in the manner as laid down in section 16.

• The public announcement referred to in

clause (b) of sub-section (1) shall be made immediately after the appointment of IRP

17

Section 13

Chapter – II (Contd…)

Section 14

 Moratorium

• n the ICD , the AA shall by order declare

moratorium for prohibiting all

• f

the following,

 the institution of suits or continuation of pending suits or proceedings against the CD  transferring, encumbering, alienating

• r

disposing off by the CD any of its assets or any legal right or beneficial interest therein  any action to foreclose, recover or enforce any security interest created by the CD in respect of its property including any action under the SARFAESI Act, 2002  the recovery of any property by an owner

• r lessor where such property is
• ccupied

by or in the possession of the CD

• The

supply

• f

essential goods

• r

services to the CD as may be specified shall not be terminated or suspended

• r

interrupted during moratorium period.

• Where the IRP or RP ,

 considers the supply

• f

goods

• r

services critical to protect and preserve the value of the CD and manage the

• perations
• f

such CD as a going concern,  then the supply

• f

such goods

• r

services shall not be terminated, suspended

• r

interrupted during the period of moratorium, except where such CD has not paid dues arising from such supply during the moratorium period

18

Chapter – II (Contd…)

Section 14 (Contd…)

 Moratorium

• The provisions of sub-section (1) shall not

apply to

 such transactions, agreements

• r
• ther

arrangement as may be notified by the Central Government in consultation with any financial sector regulator or any other authority  a surety in a contract of guarantee to a CD

• The order of moratorium shall have effect

from the date

• f

such

• rder

till the completion of the CIRP Provided that where at any time during the CIRP period, if the AA approves the resolution plan or passes an order for liquidation of CD, the moratorium shall cease to have effect Explanation.

• it is hereby clarified that notwithstanding

anything contained in any other law for the time being in force,

 a licence, permit, registration, quota, concession, clearance or a similar grant or right  given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force,  shall not be suspended or terminated on the grounds of insolvency,  subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license

19

Chapter – II (Contd…)

Section 15

 Public announcement of CIRP

• The public announcement of the CIRP

shall contain the following information,

 name and address of the CD under the CIRP, name of the authority with which the CD is incorporated or registered  the last date for submission of claims, details of the IRP who shall be vested with the management of the CD and be responsible for receiving claims  penalties for false or misleading claims, the date on which the CIRP shall close, which shall be the 180th day from the date

• f

the admission

• f

the application

• The public announcement under this

section shall be made in such manner as may be specified.

 Appointment and tenure of IRP

• The AA shall appoint an IRP on the ICD
• Where the application for CIRP is made by a FC
• r the CD, the RP, as proposed respectively in the

application shall be appointed as the IRP,

• Where the application for CIRP is made by an OC

and-

 no proposal for an IRP is made, the AA shall make a reference to the Board for the recommendation of an IP who may act as an IRP  a proposal for an IRP is made under sub-section (4)

• f section 9, the RP as proposed, shall be appointed

as the IRP

• The Board shall, within ten days recommend the

name of an IP to the AA and the term of the IRP shall continue till the date of appointment of the RP under section 22

20

Section 16

Chapter – II (Contd…)

Section 17

 Management of affairs of CD by IRP

• From the date of appointment of the IRP

 the management of the affairs of the CD shall vest in the IRP  the powers of the board of directors or the partners of the CD, shall stand suspended and be exercised by the IRP  the officers and managers of the CD shall report to the IRP and provide access to such documents and records of the CD as may be required by the IRP  the financial institutions maintaining accounts

• f

the CD shall act

• n

the instructions of the IRP in relation to such accounts and furnish all information relating to the CD available with them to the IRP.

• The IRP vested with the management of the

CD, shall-

 act and execute in the name and on behalf

• f the CD all deeds, receipts, and other

documents, if any and take such actions, in the manner and subject to such restrictions, as may be specified by the Board  have the authority to access the electronic records

• f

CD from IU having financial information of the CD  have the authority to access the books of accounts, records and

• ther

relevant documents of CD available with government authorities, statutory auditors, accountants and such other persons as may be specified  be responsible for complying with the requirements under any law for the time being in force on behalf of the CD

21

Chapter – II (Contd…)

Section 18

 Duties of IRP

• collect

all information relating to the assets, finances and operations of the CD for determining the financial position of the CD, including information relating to -

 business operations for the previous two years  financial and operational payments for the previous two years  list of assets and liabilities as on the initiation date  such other matters as may be specified

• receive

and collate all the claims submitted by creditors to him, constitute a CoC

• monitor

the assets

• f the CD and

manage its operations until a RP is appointed by the CoC

• file information collected with the IU
• take control and custody of

any asset

• ver which the CD has ownership rights

 as recorded in the balance sheet of the CD , or with IU or the depository of securities

• r

any

• ther

registry that records the

• wnership
• f

assets including -

22

Chapter – II (Contd…)

Section 18 (Contd…)

 assets over which the CD has ownership rights which may be located in a foreign country  assets that may or may not be in possession

• f the CD

 tangible assets, whether movable

• r

immovable  intangible assets including intellectual property  securities including shares held in any subsidiary of the CD, financial instruments, insurance policies  assets subject to the determination

• f
• wnership by a court or authority

 to perform such other duties as may be specified by the Board.

• Explanation. –

For the purposes of this section, the term “assets” shall not include the following, namely:  assets

• wned

by a third party in possession of the CD held under trust or under contractual arrangements including bailment  assets of any Indian or foreign subsidiary

• f the CD

 such other assets as may be notified by the Central Government in consultation with any financial sector regulator.

23

Chapter – II (Contd…)

Section 19

 Personnel to extend co-operation to IRP

• The personnel of the CD, its promoters or any
• ther

person associated with the management

• f

the CD shall extend all assistance and cooperation to the IRP as may be required by him in managing the affairs of the CD

• Where any personnel of the CD, its promoter or

any

• ther

person required to assist

• r

cooperate with the IRP does not assist or cooperate, the IRP may make an application to the AA for necessary directions

• The

AA, shall by an

• rder,

direct such personnel or other person to comply with the instructions of the RP and to cooperate with him in collection

• f

information and management of the CD

 Management of operations of CD as going concern

• The

IRP shall make every endeavour to protect and preserve the value of the property

• f

the CD and manage the

• perations of the CD as a going

concern

• the IRP shall have the authority-

 to appoint accountants, legal or

• ther

professionals as may be necessary  to enter into contracts on behalf

• f the CD or to amend or modify

the contracts

• r

transactions which were entered into before the commencement of CIRP

24

Section 20

Chapter – II (Contd…)

Section 20 (Contd…)

 to raise interim finance provided that no security interest shall be created over any encumbered property of the CD without the prior consent of the creditors whose debt is secured over such encumbered property  Provided that no prior consent

• f

the creditor shall be required where the value

• f such property is not less than the amount

equivalent to twice the amount of the debt  to issue instructions to personnel of the CD as may be necessary for keeping the CD as a going concern  to take all such actions as are necessary to keep the CD as a going concern

 Committee of creditors

• The IRP shall after collation of all

claims received against the CD and determination of the financial position of the CD, constitute a CoC

• The CoC shall comprise all FCs of

the CD (Provided that (a FC or the AR of the FC, if it is a related party

• f the CD) shall not have any right
• f representation, participation or

voting in a meeting of the CoC)

25

Section 21

Chapter – II (Contd…)

Section 21 (Contd…)

• where the CD owes financial debts to two
• r more FCs as part of a consortium or

agreement, each such FC shall be part of the CoC and their voting share shall be determined on the basis of the financial debts owed to them

• Where any person is a FC as well as an

OC,

 such person shall be a FC to the extent of the financial debt owed by the CD, with voting share proportionate to the extent of financial debts  such person shall be considered to be an OC to the extent of the operational debt

• wed
• Where an OC has assigned or legally

transferred any operational debt to a FC, the assignee or transferee shall be considered as an OC to the extent of such assignment or legal transfer

• Where the terms of the financial debt

extended as part

• f

a consortium arrangement

• r

syndicated facility provide for a single trustee or agent to act for all FCs, each FC may-

 authorise the trustee or agent to act on his behalf in the CoC to the extent of his voting share  epresent himself in the CoC to the extent of his voting share

26

Chapter – II (Contd…)

Section 21 (Contd…)

 appoint an IP (other than the RP) at his own cost to represent himself in the CoC to the extent of his voting share  exercise his right to vote to the extent of his voting share with one or more FCs jointly or severally.

• Where a financial debt—

 is in the form of securities or deposits and the terms

• f

the financial debt provide for appointment of a trustee or agent to act as AR for all the FCs, such trustee or agent shall act on behalf of such FCs;  is owed to a class of creditors exceeding the number as may be specified,

• other than the creditors covered under 6(a) the

IRP shall make an application to the AA along with the list of all FCs, containing the name of an IP, other than the IRP, to act as their AR who shall be appointed by the AA prior to the first meeting of the CoC ;

 is represented by a guardian, executor or administrator, such person shall act as AR  and such AR shall attend the meetings of the CoC , and vote on behalf of each FC

• The remuneration payable to the AR-

 if any, shall be as per the terms of the financial debt

• r

the relevant documentation  shall be as specified which shall be form part of the insolvency resolution process costs

27

Chapter – II (Contd…)

Section 21 (Contd…)

• The

Board may specify the manner

• f

voting and the determining of the voting share in respect of financial debts covered under sub-sections (6) and (6A).

• Save as otherwise provided in this Code, all

decisions of the CoC shall be taken by a vote of not less than fifty-one per cent. of voting share of the FCs:

• Provided that where a CD does not have

any FCs, the CoC shall be constituted and shall comprise of such persons to exercise such functions in such manner as may be specified

• The CoC

shall have the right to require the RP to furnish any financial information in relation to the CD at any time during the CIRP.

• The RP shall make available any

financial information so required by the CoC under sub-section (9) within a period of seven days of such requisition

28

Chapter – II (Contd…)

Section 22

 Appointment of RP

• The first meeting of the CoC shall be held

within seven days of the constitution of the CoC

• The CoC , may, in the first meeting, by a

majority vote of not less than sixty-six per

• cent. of the voting share of the FCs, either

resolve to appoint the IRP as a RP or to replace the IRP by another RP

• Where the CoC resolves

 - (a) to continue the IRP as RP  subject to a written consent from the IRP in the specified form, it shall communicate its decision to the IRP, the CD and the AA  to replace the IRP, it shall file an application before the AA for the appointment of the proposed RP along with a written consent

• The AA shall forward the name of the RP

proposed to the Board for its confirmation and shall make such appointment after confirmation by the Board.

• Where the Board does not confirm the

name of the proposed RP within ten days, the AA shall, by order, direct the IRP to continue to function as the RP until such time as the Board confirms the appointment of the proposed RP.

29

Chapter – II (Contd…)

Section 23

 Resolution professional to conduct CIRP

• the RP shall conduct the entire CIRP and

manage the operations of the CD during the CIRP period

• RP

shall continue to manage the

• perations of the CD after the expiry of

the CIRP period, until an order approving the resolution plan

• r

appointing a liquidator is passed by the AA

• In case of any appointment of a RP, the

interim RP shall provide all the information, documents and records pertaining to the CD in his possession to the RP

 Meeting of committee of creditors

• The members of the CoC may meet in

person

• r

by such

• ther

electronic means as may be specified

• All

meetings

• f

the CoC shall be conducted by the RP

• The RP shall give notice of each meeting
• f the CoC to-

 members of CoC , including the ARs  members of the suspended Board

• f

Directors or the partners of the corporate persons  OCs or their representatives if the amount

• f their aggregate dues is not less than

ten per cent. of the debt.

30

Section 24

Chapter – II (Contd…)

Section 24(Contd…)

• The

directors, partners and

• ne

representative of OCs, may attend the meetings of CoC , but shall not have any right to vote in such meetings:

• Provided that the absence of any such

director, partner

• r

representative

• f

OCs, shall not invalidate proceedings of such meeting

• any creditor who is a member of the

CoC may appoint an IP other than the RP to represent such creditor in a meeting of the CoC

• Provided that the fees payable to such

IP representing any individual creditor will be borne by such creditor.

• Each creditor shall vote in accordance

with the voting share assigned to him based on the financial debts owed to such creditor

• The RP shall determine the voting share

to be assigned to each creditor in the manner specified by the Board

• The meetings of the CoC

shall be conducted in such manner as may be specified

31

Chapter – II (Contd…)

Section 25

 Duties of resolution professional

• It shall be the duty of the RP to preserve and

protect the assets of the CD, including the continued business operations of the CD

• the RP shall undertake the following actions,

namely: -

 take immediate custody and control of all the assets

• f

the CD, including the business records of the CD  raise interim finances subject to the approval

• f the CoC ,appoint accountants, legal or
• ther professionals in the manner as specified

by Board  maintain an updated list of claims, convene and attend all meetings of the CoC, prepare the IM  invite prospective RAs, who fulfil such criteria as may be laid down by him with the approval of CoC

• having regard to the complexity and

scale of operations of the business of the CD and such other conditions as may be specified by the Board, to submit a resolution plan or plans

 present all resolution plans at the meetings of the CoC  file application for avoidance

• f

transactions in accordance with Chapter III, if any  such other actions as may be specified by the Board.

32

Chapter – II (Contd…)

Section 25A

 Rights and duties of AR of FCs

• The AR shall have the right to participate

and vote in meetings of the CoC on behalf

• f the FC
• It shall be the duty of the AR to circulate the

agenda and minutes of the meeting of the CoC to the FC

• The AR shall not act against the interest of

the FC he represents and shall always act in accordance with their prior instructions

 if the AR represents several FCs, then he shall cast his vote in respect

• f

each FC in accordance with instructions received from each FC

• if any FC does not give prior instructions

through physical or electronic means, the AR shall abstain from voting

• AR shall cast his vote on behalf of all the FCs

he represents in accordance with the decision taken by a vote of more than fifty per cent.

• a vote to be cast in respect of an application

under section 12A, the AR shall cast his vote in accordance with subsection (3)

 The AR shall file with the CoC any instructions received by way

• f

physical

• r

electronic means to ensure that the appropriate voting instructions of the FC is correctly recorded by the IRP or RP

33

Chapter – II (Contd…)

Section 26

 Application for avoidance

• f

transactions not to affect proceedings

• The

filing

• f

an avoidance application under clause (j) of sub-section (2) of section 25 by the RP shall not affect the proceedings of the CIRP

 Replacement of RP by CoC

• Where, at any time during the CIRP, the CoC is
• f the opinion that a RP is required to be

replaced, it may replace him with another RP

• The CoC may, at a meeting, by a vote of sixty-

six per cent of voting shares, resolve to replace the RP with another RP,

• The CoC

shall forward the name of the IP proposed by them to the AA

• The

AA shall forward the name

• f

the proposed RP to the Board for its confirmation

• Where

any disciplinary proceedings are pending against the proposed RP, the RP appointed shall continue till the appointment

• f another RP

34

Section 27

Chapter – II (Contd…)

Section 28

 Approval of CoC for certain actions

• The RP, during the CIRP, shall not take any
• f the following actions without the prior

approval of the CoC namely: -

 raise any interim finance in excess of the amount as may be decided by the CoC in their meeting  create any security interest over the assets

• f the CD

 change the capital structure of the CD,  record any change in the ownership interest

• f the CD

 give instructions to financial institutions maintaining accounts of the CD for a debit transaction from any such accounts in excess of the amount as may be decided by the CoC in their meeting  undertake any related party transaction  amend any constitutional documents of the CD  delegate its authority to any other person  dispose of or permit the disposal of shares of any shareholder of the CD or their nominees to third parties  make any change in the management of the CD or its subsidiary  transfer rights or financial debts or operational debts under material contracts  make changes in the appointment or terms of contract of such personnel as specified by the CoC  make changes in the appointment or terms of contract of statutory auditors or internal auditors

• f the CD.

35

Chapter – II (Contd…)

Section 28 (Contd…)

• The RP shall convene a meeting of the CoC

and seek the vote of the creditors prior to taking any of the actions under sub-section (1)

• No action under sub-section (1) shall be approved by the CoC

unless approved by a vote of [sixty-six] per cent. of the voting shares

• Where any action under sub-section (1) is taken by the RP without

seeking the approval of the CoC in the manner as required in this section, such action shall be void

• The CoC may report the actions of the RP under sub-section (4) to the

Board for taking necessary actions against him under this code

36

Chapter – II (Contd…)

Section 29

 Preparation of information memorandum

• The RP shall prepare an IM containing

such relevant information as may be specified by the Board

• The RP shall provide to the RA access to all

relevant information in physical and electronic form, provided such RA undertakes-

 to comply with provisions of law for the time being in force relating to confidentiality and insider trading, to protect any intellectual property of the CD it may have access to  not to share relevant information with third parties unless clauses (a) and (b) of this sub- section are complied with

 Persons not eligible to be RA

• A person shall not be eligible to submit a

resolution plan, if such person, or any

• ther person acting jointly or in concert

with such person—

 is an undischarged insolvent  is a wilful defaulter in accordance with the guidelines of the RBI  at the time of submission of the resolution plan has an account or an account of a CD under the management or control of such person or of whom such person is a promoter, classified as NPA and at least a period of one year has lapsed from the date of such classification till the date of commencement of the CIRP of the CD

37

Section 29A

Chapter – II (Contd…)

Section 29A (Contd…)

 the person shall be eligible to submit a resolution plan if such person makes payment

• f

all

• verdue

amounts with interest thereon and charges relating to NPA accounts before submission

• f

resolution plan  Provided further that nothing in this clause shall apply to a RA where such applicant is a financial entity and is not a related party to the CD

• has

been convicted for any

• ffence

punishable with imprisonment –

 for two years

• r

more under any Act specified under the Twelfth Schedule  for seven years or more under any law for the time being in force:

• this clause shall not apply to a person

after the expiry of a period of two years from the date of his release

• is disqualified to act as a director under

the Companies Act, 2013

• is prohibited by the SEBI from trading in

securities

• r

accessing the securities markets

• has

been a promoter

• r

in the management or control of a CD in which a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place and in respect of which an

• rder has been made by the AA

38

Chapter – II (Contd…)

Section 29A (Contd…)

• has executed a guarantee in favour of

a creditor in respect of a CD

 against which an application for insolvency resolution made by such creditor has been admitted under this Code and such guarantee has been invoked by the creditor and remains unpaid in full or part

• is

subject to any disability, corresponding to clauses (a) to (h), under any law in a jurisdiction outside India

• has a connected person not eligible

under clauses (a) to (i)

• the

expression "connected person" means—

 any person who is the promoter or in the management or control of the RA  any person who shall be the promoter

• r in management or control of the

business of the CD  the holding company, subsidiary company, associate company

• r

related party of a person referred to in clauses (i) and (ii)

39

Chapter – II (Contd…)

Section 30

 Submission of resolution plan

• A RA may submit a resolution plan along

with an affidavit stating that he is eligible under section 29A to the RP prepared on the basis of the IM

• The RP shall examine each resolution plan

received by him to confirm that each resolution plan –

 provides for the payment

• f insolvency

resolution process costs priority to the payment of other debts of the CD  provides for the payment of debts of OCs which shall not be less than-

• the amount to be paid to such creditors in

the event of a liquidation of the CD under section 53; or

• the amount that would have been paid to

such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the

• rder of priority in sub-section (1) of section

53, whichever is higher,

• and provides for the payment of debts of

FCs, who do not vote in favour of the resolution plan, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the CD.

 provides for the management

• f

the affairs of the CD after approval of the resolution plan  The implementation and supervision of the resolution plan

40

Chapter – II (Contd…)

 does not contravene any of the provisions of the law for the time being in force  confirms to such other requirements

• The RP shall present to the CoC for its approval such resolution plans which confirm the

conditions referred to in sub-section (2)

• The CoC may approve a resolution plan by a vote of not less than [sixty-six] per cent.

after considering its feasibility and viability, the manner of distribution proposed, which may take into account the order of priority amongst creditors

• The RA may attend the meeting of the CoC in which the resolution plan of the applicant

is considered

• Provided that the RA shall not have a right to vote at the meeting of the CoC

unless such RA is also a FC

• The RP shall submit the resolution plan as approved by the CoC to the AA

41

Section 30 (Contd…)

Chapter – II (Contd…)

Section 31

 Approval of resolution plan

• If the AA

is satisfied that the resolution plan as approved by the CoC meets the requirements, it shall by order approve the resolution plan which shall be binding on

 the CD and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and

• ther

stakeholders involved in the resolution plan

• Where

the AA is satisfied that the resolution plan does not confirm to the requirements it may, by an order, reject the resolution plan

• After the order of approval under sub-

section (1),

 the moratorium order passed by the AA shall cease to have effect  the RP shall forward all records relating to the conduct of the CIRP and the resolution plan to the Board to be recorded on its database

• The

RA shall

• btain

the necessary approval required under any law for the time being in force within a period

• f one year or within such period as

provided for in such law, whichever is later

 where the resolution plan contains a provision for combination, the RA shall

• btain the approval of the Competition

Commission of India

42

Chapter – II (Contd…)

Section 32

 Appeal

• Any appeal from an order approving the

resolution plan shall be in the manner and

• n the grounds laid down in sub-section

(3) of section 61.

• the liability of

a CD for an offence committed prior to the commencement

• f the CIRP shall cease, and the CD shall

not be prosecuted from the date the resolution plan has been approved by the AA under section 31, if the resolution plan results in the change in the management

• r control of the CD to a person who was

not-

 a promoter

• r

in the management

• r

control of the CD or a related party of such a person; or  person with regard to whom

• the relevant investigating authority has, on the

basis of material in its possession,

• reason to believe that he had abetted or

conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court:

 No action shall be taken against the property

• f the CD
• in relation to an offence committed prior to

the commencement of the CIRP of the CD, where such property is covered under a resolution plan approved by the AA

• which results in the change in control of the

CD to a person, or sale of liquidation assets under the provisions of Chapter III of Part II of this Code to a person, who was not –

43

Chapter – II (Contd…)

Section 32 (Contd…)

 a promoter or in the management or control of the CD or a related party of such a person; or  a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court.

• Subject

to the provisions contained in sub-sections (1) and (2), and notwithstanding the immunity given in this section,

 the CD and any person, who may be required to provide assistance under such law as may be applicable to such CD or person,  shall extend all assistance and co-operation to any authority investigating an offence committed prior to the commencement of the CIRP

44